Home rental or sale?

Asked by Gary, Eastpointe, MI Wed Nov 19, 2008

I am considering renting my home in Eastpointe MI. until the market can make a turnaround. We have put a lot into the house and there is no way that we will get out what we have put in but we need to move to a bigger house and we already have our kids in another school district. I am very worried about the renting thing because we have put so much into the house. We are currently on the 13th year of our 5 year plan.....

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Keith Sorem, Agent, Glendale, CA
Thu Nov 20, 2008
When you become a real estate investor you stop being a typical homeowner.

We are the results of our decisions. It is not uncommon for people to "over-improve" their home because they rationalize that they are going to live there and enjoy it. However, when circumstances change, and they need to sell, they kick themselves for over-spending.

As long as you think you made the best decision at the time, then you just have to move forward. In your case that means when a home becomes an income property, stop thinking about it as "my home" because it will drive you crazy.

We were in the same boat and in the Long Term (18 years) after becoming accidental investors it worked out great. I recommend checking with your lender on their flexibility of having the property be "non-owner occupied".

Also, talk with a CPA and financial planner about what happens then its time to SELL your home.

Good luck!
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, ,
Wed Nov 19, 2008
As the previous posters said, speak with a lender to find out if this is even a possibility for you.

Both FHA and Fannie Mae/Freddie Mac have recently instituted new guidelines for converting a primary residence to a rental then purchasing a new home (called Buy and Bail policy). This would apply to most of the available mortgage options out there in the marketplace right now.

Basically unless you have at least 25% equity or more in the current home (which from your post it sounds like you dont), you have to qualify for both the current house payment AND the payment on the house you intend to buy, and you cannot use any prospective rental income to help offset things. In addition you may need to have 6 months worth of BOTH house payments in reserve.

I can go over the finer details with you if you like. Just shoot me an email or give me a call at 734-528-5511

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Ed & Cindy K…, Agent, Shelby Township, MI
Wed Nov 19, 2008
Hi Gary as Debra said many owners are doing the same today and especially in Eastpointe, since they have taken such a beating in value. But you should know that when you rent your property taxes will go up quite a bit, so you will need to figure that into your rental price. Check the link below to calculate. Also, as a landlord myself I recommend you have someone run a credit report for you. Unless you payment is really really low you may not be able to get a property manager.

But before doing anything you need to first check with a good mortgage person to see if you will qualify for both homes. Due to the amount of problems in the marketplace many banks are getting very strict when it comes to buying a new home when you are renting the old one. If you need any assistance feel free to give us a call.
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Bob Burwick, , Buckeye, AZ
Wed Nov 19, 2008
Gary – Rentals can be easy if you go about it the correct way – The first and most important step is to contact a Professional Property Management Company that works in your area. If you are not familiar with any just call your Realtor and ask them for recommendations. The Management Company will be able to advise you as to what you might expect as far as rent and should be able to give you some idea of how long you can expect to have the home on the market prior to finding the right tenant. They will qualify possible tenants and make recommendations as well as manage the property while it is rented if you so desire.
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Derek Joyner, , Winston Salem, NC
Wed Nov 19, 2008
Renting has its evils. If you love your home a renter can make you feel violated. You have to get past the fact that you have made your home so nice. The number 1 reason I think that landlords do bad with rentals is that they dont make the process tough enough to get in. Most landlords make it as easy as possiable for the renter to get in, in fear that they may loose a renter. You have to make hoops for the renter to jump thru. You have to ask for a nice security deposit. Remember the security deposit is the only money you will get when they tear the place up and leave, never to be hear from again. You have to get them to agree to a credit report. Get them to go on an appointment to go look at the place. You will be able to tell a lot if you get them to go on an appointment. Dont look at the obvious that they are nice. Your worst renters will be the nicest ones up front until they get the house. Get at the appointment early. See if they show up early, on time or late. If you are strict with telling them all that they cant do and they want to ask you to do different. That is good, they are trying to tell you the truth and not do it anyway when they get the house. You can tell what kind of a person they are by what kind of questions they ask. If the first question is are you open to not penalizing for a 3 day late payment. These kind of questions should throw up a red flag. Ask a lot of questions about where have you been and what do you do.Ask for references. Than you can go and check for references and you know they will only give you the good ones. But you can check with those references on time they were there. Than you can put 2 and 2 together. If you check with a reference and they were there all of 05. The next reference tells you they were there for half of 06. Than you know there was 6 months there not told. If you asked the questions about where have you been and what do you do, than you can probably paint a picture if what happen with that 6 months. If they moved here from somewhere aways the blank may not matter. If they have lived here the whole time you may assume the 6 months was with a bad renter they did not want to tell you about. Basically its all about reading people. Remember you can interview as much as you want. Once they are in its hard to get them out.
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Debra Drummo…, , Plymouth, MI
Wed Nov 19, 2008
Hi Gary,

There are lots of owners in your situation. With the market being down, if people don't need to sell, they are sitting tight. The good thing about selling in this market is that you'll likely make it up on the buying side.

When considering leasing, you should first check with your lender. In the past they had counted a large portion of the rental payment, but things may have changed so you might want to inquire before you go further. Also, check your mortgage because leasing may invalidate the terms.

I've heard owners having good and bad experiences with leasing. If you opt to go that way, be sure you request a credit report and references.

To research becoming a landlord, here's a link to the State of Michigan Tenant/Landlord Handbook:


Whatever you decide to do, Good luck!
Web Reference:  http://MichiganMoves.info
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